W.S. KIRKPATRICK & CO., INC., ET AL., PETITIONERS V. ENVIRONMENTAL
TECTONICS CORPORATION, INTERNATIONAL
No. 87-2066
In the Supreme Court of the United States
October Term, 1988
On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Third Circuit
Brief for the United States as Amicus Curiae
This brief is filed in response to the Court's order inviting the
Solicitor General to express the views of the United States.
TABLE OF CONTENTS
Questions Presented
Statement
Discussion
Conclusion
QUESTIONS PRESENTED
1. Whether the act of state doctrine bars judicial inquiry into
whether the award by the Nigerian Government of a military
construction contract was caused by the payment of bribes to Nigerian
officials.
2. Whether plaintiff alleged a "pattern of racketeering activity"
within the meaning of the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. 1961-1968 (1982 & Supp. V 1987).
STATEMENT
Respondent, a Pennsylvania corporation, is the disappointed bidder
on a construction contract awarded by the Federal Republic of Nigeria.
A subsidiary of petitioner W.S. Kirkpatrick, Inc., a New Jersey
corporation, was the successful bidder. Respondent alleges that
Kirkpatrick obtained the contract by bribing officials of the Nigerian
Government. Respondent seeks to recover damages from Kirkpatrick and
the other petitioners under the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. 1961-1968 (1982 & Supp. V 1987);
Section 2(c) of the Robinson-Patman Act, 15 U.S.C. 13(c); and the New
Jersey Anti-Racketeering Act, N.J. Stat. Ann. Sections 41-1 to 41-6.2
(West 1982).
1. In 1980, defendant Harry Carpenter, Kirkpatrick's Chairman and
Chief Executive Officer, learned that the Nigerian Government was
interested in constructing and equipping an aeromedical center for the
Nigerian Air Force. /1/ Carpenter hired a Nigerian national,
defendant Benson "Tunde" Akindele, to act as Kirkpatrick's local agent
in procuring the contract. According to a March 1981 memorandum,
Akindele informed Carpenter that Kirkpatrick should be prepared to pay
a "sales commission" totalling 20% of the contract price to Nigerian
political and military officials. Akindele stated that Nigerian
officials generally expected such payments from bidders and that
American companies often lost Nigerian defense contracts to their
European competitors because they failed to make such arrangements.
/2/ Ultimately, Kirkpatrick and Akindele entered into a written
agreement providing that, upon successful award of the contract,
Kirkpatrick would pay a commission to two Panamanian corporations
established by Akindele to receive and distribute the commission to
the relevant Nigerian officials. Eventually, both respondent and
Kirkpatrick submitted bids, and the contract was awarded to a
subsidiary of Kirkpatrick on March 19, 1982. On four occasions in
1982 and 1983, the Nigerian Government made payments under the
contract to Kirkpatrick. On each occasion, Kirkpatrick paid the
promised "commission" to Akindele's Panamanian corporations, which
then distributed the monies. Kirkpatrick paid more than $1.7 million
in "commissions" under this arrangement. Pet. App. A4-A6, A42-A43.
In April 1983, respondent learned that its bid had been far lower
than Kirkpatrick's. After investigating the matter, respondent
reported its findings to the Nigerian Air Force and the United States
Embassy in Lagos. Ultimately, Carpenter and Kirkpatrick pleaded
guilty to one count of violating the Foreign Corrupt Practices Act of
1977 (FCPA), 15 U.S.C. 78dd-2. In connection with their pleas,
Carpenter and Kirkpatrick stipulated to an offer of proof that
outlined the agreement between Carpenter and Akindele and the payments
to the Panamanian corporations, but did not state that money had
actually been paid to Nigerian officials. Carpenter was sentenced to
200 hours of community service and fined $10,000; Kirkpatrick was
fined $75,000, payable over a five-year period. Pet. App. A6-A7,
A43-A44. /3/
2. a. Respondent then brought this suit seeking to recover damages
from Kirkpatrick and the other petitioners for its loss of the
contract. Petitioners moved to dismiss the complaint on the ground,
inter alia, that the suit is barred by the act of state doctrine.
Before ruling on that defense, the district court requested the views
of the Department of State. The Legal Adviser responded by letter
dated December 10, 1986. He informed the court that the United States
had taken the position in its amicus briefs in Mitsui & Co. v.
Industrial Investment Development Corp., 445 U.S. 903 (1980), and Hunt
v. Mobil Oil Corp., 434 U.S. 984 (1977), that inquiries into the
motivation (as distinguished from the validity) of the official acts
of a foreign sovereign are not barred by the act of state doctrine
(Pet. App. A34-A37). Quoting those briefs, he explained (id. at A35
(emphasis in letter)):
"(W)hile judicial examination of purpose may on occasion
implicate some of the concerns underlying the act of state
doctrine, that doctrine only precludes judicial questioning of
the validity or legality of foreign government actions . . . .
None of this Court's decisions suggests that the act of state
doctrine precludes all judicial inquiries that may embarrass a
foreign state or affect the political branches' conduct of
foreign relations. Rather, the act of state doctrine is based
on the need to avoid unprincipled decisions resulting from the
absence of legal standards, and the unique embarrassment, and
the particular interference with the conduct of foreign affairs,
that may result from the judicial determination that a foreign
sovereign's acts are invalid. Judicial inquiry into the purpose
of a foreign sovereign's acts would not require a court to rule
on the legality of those acts, and a finding concerning purpose
would not entail the particular kind of harm that the act of
state doctrine is designed to avoid. Dismissal of a complaint
before the development of evidence, merely because adjudication
raises the bare possibility of embarrassment, constitutes an
unwarranted expansion of the act of state doctrine and is
contrary to the flexibility with which that doctrine should be
applied."
Adhering to this view, and based on his understanding that "the
validity of the Nigerian Government's decision to award the contract *
* * is not in question," the Legal Adviser stated that the act of
state doctrine would not bar the court "from adjudicating this
dispute," even though it might entail an inquiry into the Nigerian
Government's motivations in awarding the contract (Pet. App. A36). He
cautioned, however, that "inquiries into the motivation and validity
of foreign states' actions and discovery against foreign government
officials may seriously affect United States foreign relations." He
therefore urged the district court "to assure that no unnecessary
inquiries are made, or allegations tested, during the course of
discovery or trial." Ibid. /4/
b. After receiving the Legal Adviser's letter, the district court
dismissed respondent's suit (Pet. App. A38-A73), holding that it is
barred by the act of state doctrine (id. at A53-A66). In the court's
view, the act of state doctrine applies whenever a suit would require
judicial investigation of the acts of a foreign government or might
interfere with the conduct of foreign policy by the Executive Branch
(id. at A53-A55, A58). It found both of those defects here.
First, the court noted that in order to prevail, respondent must
demonstrate that petitioners "intended to wrongfully influence the
decision to award the Nigerian Contract by payment of a bribe, that
the Government of Nigeria, its officials or other representatives knew
of the offered consideration for awarding the Nigerian Contract to
Kirkpatrick, that the bribe was actually received or anticipated and
that 'but for' the payment or anticipation of the payment of the
bribe, (respondent) would have been awarded the Nigerian Contract"
(Pet. App. A55-A56). Because "an indispensable ingredient of
(respondent's) cause of action requires establishing the involvement
of the Government of Nigeria, its officials or representatives in
corrupt activities which violate Nigerian law," the court believed it
would "question()," either "directly or collaterally," the acts of a
foreign sovereign (id. at A57-A58; see also id. at A60, A64-A65).
Second, the court believed such an inquiry might embarrass the
political branches, or at least make the conduct of the United States'
relations with Nigeria more difficult, by inquiring into and impugning
the integrity of decisions of Nigerian officials (id. at A55, A56,
A58, A60, A64-A65).
The court also rejected respondent's contentions that it could
properly "inquire as to the motivation, rather than the validity, of
the questioned activities" (Pet. App. A58-A59) and that the
prosecutions of Carpenter and Kirkpatrick under the FCPA established
an exception to the act of state doctrine in the circumstances of this
case (id. at A61-A62). On the latter point, the court found it
significant that the offer of proof in the FCPA case was carefully
worded and did not establish that bribes had actually been paid to
Nigerian officials (id. at A62).
Finally, the court held that the Legal Adviser's letter did not
bring this case within the "Bernstein exception" to the act of state
doctrine, which may be invoked where the Executive Branch represents
that application of the doctrine would not advance the interests of
United States foreign policy (Pet. App. A62-A65). /5/ The court
reasoned that although the Legal Adviser took the position that the
act of state doctrine is inapplicable in this case, he acknowledged
that "inquiries into the motivation and validity of actions by foreign
states * * * may seriously affect United States foreign relations"
(id. at A63). The court rejected the Legal Adviser's suggestion that
it should entertain the suit but "conduct the litigation with an eye
to foreign policy concerns," because, in its view, that approach would
violate the primacy of the Executive Branch in foreign affairs (id. at
A63-A64).
3. a. The court of appeals reversed (Pet. App. A1-A37). It
acknowledged that the award of a military procurement contract can be
a sufficiently formal expression of sovereign interests to trigger the
act of state doctrine and that such an award does not fall within any
exception for ministerial or "commercial" acts, since it may involve
national security considerations that "are far from routine" (id. at
A12-A13). But the court held the act of state doctrine inapplicable
for other reasons (id. at A13-A21). In its view, "the district
court's dismissal was based on little more than speculation about the
effect that (respondent's) lawsuit might have on relations between the
United States and Nigeria," since "(t)he traditional justification for
involving (sic) the doctrine, i.e., avoiding a judicial determination
of the legal validity of a state's act within its own borders, is not
present in this case" (id. at A17). The court noted in this regard
that respondent did not seek to have the contract invalidated or to
recover damages from the Nigerian Government or any of its officials,
and "the district court would be called upon simply to determine as a
factual matter whether (Kirkpatrick's) alleged bribery of Nigerian
officials motivated the award of the contract" (id. at A17-A18).
The court of appeals accordingly rejected what it termed the
"expansive interpretation" of the act of state doctrine by the Ninth
Circuit in Clayco Petroleum Corp. v. Occidental Petroleum Corp., 712
F.2d 404, 407 1983), cert. denied, 464 U.S. 1040 (1984), which held
that judicial inquiry into whether bribery caused a foreign sovereign
act was barred because it would "impugn or question the nobility of a
foreign nation's motivation" (Pet. App. A15). In the court's view,
the doctrine should not "allow litigants to shield themselves from the
consequences of illegal conduct abroad" and should not "in all
circumstances foreclose judicial scrutiny of the motivations behind
the military procurement decisions of a foreign government" (id. at
A16). The court found support for this view in the Legal Adviser's
letter, finding that "the State Department is satisfied that the
conduct of American foreign policy relative to Nigeria will not be
compromised by orderly federal court adjudication of (respondent's)
lawsuit" (id. at A19). /6/
b. The court of appeals also held that respondent had alleged a
"pattern of racketeering activity" within the meaning of the RICO
statute and the parallel state anti-racketeering statute (Pet. App.
A22-A24). It concluded that "allegations of illegal conduct that
constitute a single, completed criminal episode are in some
circumstances sufficient to describe a pattern of racketeering
activity," depending upon such factors as "the number of unlawful
acts, the length of time over which the acts were committed, the
similarity of the acts, the number of victims, the number of
perpetrators, and the character of the unlawful activity" (id. at
A22).
DISCUSSION
The decision of the court of appeals in this case squarely
conflicts with the Ninth Circuit's holding in Clayco Petroleum Corp.
v. Occidental Petroleum Corp., 712 F.2d 404 (1983), cert. denied, 464
U.S. 1040 (1984), that the act of state doctrine bars judicial inquiry
into whether a foreign sovereign act was motivated by a bribe.
Questions concerning the extent (if any) to which the act of state
doctrine bars United States courts from ascertaining the motivation
for the official acts of foreign governments are important and
recurring. We also believe that the lower courts would benefit from
guidance by this Court about the contours and bases of the act of
state doctrine, in light of the splintered decisions in First National
City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972), and Alfred
Dunhill of London, Inc. v. Cuba, 425 U.S. 682 (1976), and the passage
of 13 years since the latter ruling. Review by this Court is
therefore warranted.
We have twice before urged the Court to grant certiorari to
consider application of the act of state doctrine in cases involving
an inquiry into the motivations behind a foreign sovereign act, but
the Court denied review in both cases. Mitsui & Co. v. Industrial
Investment Development Corp., 445 U.S. 903 (1980); Hunt v. Mobil Oil
Corp., 434 U.S. 984 (1977). Earlier this Term, the Court again denied
certiorari in a case in which the petitioner sought to raise these
issues. O.N.E. Shipping Ltd. v. Flota Mercante Grancolombiana, S.A.,
109 S. Ct. 303 (1988). In that case, however, we urged the Court to
deny review primarily because the factual and legal context of the
case was murky and because it was unclear whether, or to what extent,
a judicial inquiry into the motivations of foreign officials would
actually be required. /7/
This case presents no such difficulties: the allegations in the
complaint are straightforward; they clearly present the act of state
issue; and they do so in a not atypical factual context (alleged
bribery) that fully and starkly illuminates a number of the competing
considerations. This case therefore presents an appropriate occasion
for the Court to revisit the act of state doctrine.
We took the position in our briefs in Mitsui, Hunt and O.N.E.
Shipping that the act of state doctrine does not ordinarily bar
judicial inquiry into the motivation, as such, for a foreign sovereign
act; the Legal Adviser reiterated that position in his letter to the
district court in this case. That continues to be our view as a
general matter. Nevertheless, in connection with the instant case,
the Department of Justice and the Department of State have undertaken
a review of a number of aspects of the act of state doctrine. That
review is not complete. Accordingly, at this stage of the case, we
shall limit ourselves to a discussion of the background of the issues
raised and some of the factors that may have a bearing on the Court's
(and the parties') consideration of those issues. If the Court grants
the petition, we will file a brief at the merits stage setting forth
the concluded view of the United States.
Petitioners also seek review of the court of appeals' holding that
respondent sufficiently alleged a "pattern of racketeering activity"
within the meaning of the RICO statute. The meaning of that statutory
requirement is before the Court in H.J. Inc. v. Northwestern Bell
Telephone Co., No. 87-1252, in which oral argument was held on
November 8, 1988. There is, accordingly, no reason for the Court to
grant plenary review on that question here. /8/ Instead we suggest
that the Court hold the petition with respect to Question 2 until it
finally disposes of Question 1, and that it then dispose of the
petition as to Question 2 as appropriate in light of H.J. Inc. The
act of state issues will not be mooted even if the Court's decision in
H.J. Inc. should require that respondent's RICO and state-law
racketeering claims be dismissed, because the act of state issues are
also raised by respondent's claim under Section 2(c) of the
Robinson-Patman Act, 15 U.S.C. 13(c). /9/
1. The "classic" formulation of the act of state doctrine is set
forth in Underhill v. Hernandez, 168 U.S. 250, 252 (1897):
Every sovereign State is bound to respect the independence of
every other sovereign State, and the courts of one country will
not sit in judgment on the acts of the government of another
done within its own territory. Redress of grievances by reason
of such acts must be obtained through the means open to be
availed of by sovereign powers as between themselves.
Put another way, the doctrine "precludes the courts of this country
from inquiring into the validity of the public acts (of) a recognized
foreign sovereign power committed within its own territory." Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401 (1964). See also
Alfred Dunhill, 425 U.S. at 706 (opinion of White, J.). The act of
state doctrine thus respects principles of sovereignty and
international comity and, where applicable, operates as a
choice-of-law principle supplying the appropriate rule of decision in
cases in which the validity of the act of a foreign sovereign is
questioned in United States courts. See Sabbatino, 376 U.S. at 418;
Oetjen v. Central Leather Co., 246 U.S. 297, 303-304 (1918); Ricaud
v. American Metal Co., 246 U.S. 304, 309 (1918). More recently, the
doctrine has been thought to derive as well from the separation of
powers under the Constitution, reflecting a "policy of foreclosing
court adjudications involving the legality of acts of foreign states
on their own soil that might embarrass the Executive Branch * * * in
the conduct of foreign relations," and "the proper distribution of
functions between the judicial and political branches of the
Government on matters bearing upon foreign affairs." Alfred Dunhill,
425 U.S. at 697 (opinion of White, J.); Sabbatino, 376 U.S. at
427-428, 431-433.
As is evident from these pronouncements, the act of state doctrine
has rather limited contours. It does not ordinarily require dismissal
of a suit merely because the litigation touches upon foreign relations
concerns. /10/ In fact, the doctrine is a rather narrow exception to
the general duty of courts to adjudicate cases otherwise properly
before them. See Sharon v. Time, 599 F. Supp. 538, 553 (S.D.N.Y.
1984); Restatement (Third) of Foreign Relations Law Section 443
(1987). Despite the seemingly absolute nature of the doctrine as
formulated in Underhill, this Court has declined to lay down an
"inflexible and all-encompassing" rule (Sabbatino, 376 U.S. at 428;
accord Republic of the Philippines v. Marcos, 862 F.2d 1355, 1360-1361
(9th Cir. 1988) (en banc), cert. denied, 109 S. Ct. 1933 (1989)), and
in First National City Bank and Alfred Dunhill, it permitted judicial
inquiry into the validity of the act of a foreign sovereign where that
result was consistent with related legal principles or the underlying
purposes of the doctrine. On the other hand, because it is based on
the "competency of dissimilar institutions to make and implement
particular kinds of decisions in the area of international relations"
(Sabbatino, 376 U.S. at 423), the act of state doctrine, where it
applies, requires judicial abstention, despite the resulting hardship
upon individual litigants whose otherwise potentially meritorious
claims cannot be adjudicated in United States courts.
2. a. The lower courts have been divided over the application of
the act of state doctrine in cases that may involve a judicial inquiry
into the motivation of a foreign state and its agents. The courts
have found such an inquiry to be barred in some cases. Clayco, supra;
Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.), cert. denied, 434
U.S. 984 (1977); Occidental Petroleum Corp. v. Buttes Gas & Oil Co.,
331 F. Supp. 92 (C.D. Cal. 1971), aff'd, 461 F.2d 1261 (9th Cir.
1972). In others, including the decision below, such an inquiry has
been permitted. Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d
1030 (9th Cir. 1983), cert. denied, 464 U.S. 849 (1983); Williams v.
Curtiss-Wright Corp., 694 F.2d 300 (3d Cir. 1982); Mannington Mills,
Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979); Industrial
Investment Development Corp. v. Mitsui & Co., 594 F.2d 48 (5th Cir.
1979), cert. denied, 445 U.S. 903 (1980); Timberlane Lumber Co. v.
Bank of America, N.T. & S.A., 549 F.2d 597 (9th Cir. 1976). See also
Restatement (Third) of Foreign Relations Law Section 443, reporter's
note 7, at 379-80 (1987).
We recognize that the results in some of the cases might be
reconciled -- e.g., on the ground that inquiry has been barred where
the act of the foreign sovereign was itself the direct or immediate
cause of the injury, rather than merely part of the context in which
essentially private conduct caused the injury (see Clayco, 712 F.2d at
407 (distinguishing Mitsui on this basis)), or that the nature of the
inquiry into motivation was such that it necessarily would implicate
validity (see Hunt, 550 F.2d at 77). Even so, the lower courts remain
uncertain and varied in their analytical approaches to deciding
whether "motivation" is a proper subject of inquiry.
To some extent, the divergence in approach may reflect differing
views of the underpinnings and primary focus of the act of state
doctrine. For example, if a court emphasizes the choice-of-law
aspects of the doctrine, /11/ it may be disposed to consider only
whether the act of the foreign state will either be given effect or
held invalid as a formal matter, and to regard a judicial inquiry into
the reasons why the foreign government took the actions it did (e.g.,
because of corruption or pressure exerted by private parties, rather
than because of distinctly governmental or sovereign interests) as
largely beyond the concern of the act of state doctrine. On the other
hand, if a court emphasizes the separation-of-powers aspects of the
doctrine, it may be disposed to ask whether the Executive Branch's
conduct of the Nation's foreign relations would be embarrassed by
adjudication of the particular case, and thus to be concerned about
whether a foreign government would be offended by litigation in United
States courts that might expose its decision-making to scrutiny or
impugn its integrity.
b. The tension between these two visions of the act of state
doctrine is exacerbated in the present context by the uncertain
relationship among this Court's decisions in American Banana Co. v.
United Fruit Co., 213 U.S. 347 (1909); United States v. Sisal Sales
Corp., 274 U.S. 268 (1927); and Continental Ore Co. v. Union Carbide
& Carbon Corp., 370 U.S. 690 (1962). In American Banana, the Court,
in an opinion by Justice Holmes, affirmed the dismissal of a private
antitrust suit alleging that the defendant had caused the government
of Costa Rica to seize the plaintiff's property (a banana plantation)
for the purpose of eliminating it as a competitor. The Court first
held that the antitrust laws did not reach conduct occurring outside
the United States (213 U.S. at 357), a holding that has been rejected
by subsequent decisions. See Continental Ore, 370 U.S. at 704-705.
However, the Court also relied on act of state principles (213 U.S. at
357-359):
The substance of the complaint is that, the plantation being
within the de facto jurisdiction of Costa Rica, that state took
and keeps possession of it by virtue of its sovereign power.
But a seizure by a state is not a thing that can be complained
of elsewhere in the courts. Underhill v. Hernandez, 168 U.S.
250.
* * * * *
The fundamental reason why persuading a sovereign power to do
this or that cannot be a tort * * * is that it is a
contradiction in terms to say that within its jurisdiction it is
unlawful to persuade a sovereign power to bring about a result
that it declares by its conduct to be desirable and proper. It
does not, and foreign courts cannot, admit that the influences
were improper or the results bad. It makes the persuasion
lawful by its own act. The very meaning of sovereignty is that
the decree of the sovereign makes law.
* * * * *
* * * As to the buying at a high price, etc., it is enough to
say that we have no ground for supposing that it was unlawful in
the countries where the purchases were made. * * * A conspiracy
in this country to do acts in another jurisdiction does not draw
to itself those acts and make them unlawful, if they are
permitted by the local law.
Sisal Sales was an injunctive action alleging that the defendants
had conspired in the United States to monopolize and restrain trade in
sisal by, inter alia, securing passage of favorable legislation by the
Government of Mexico. In holding that the complaint stated a valid
claim for relief, the Court distinguished American Banana as involving
"acts done outside the United States and not unlawful by the law of
the place" (274 U.S. at 276). By contrast, in Sisal Sales, "(t)he
United States complain(ed) of a violation of their laws within their
own territory by parties subject to their jurisdiction, not merely of
something done by another government at the instigation of private
parties" (ibid.). Although "the conspirators were aided by
discriminating legislation," they were "within the jurisdiction of our
courts and (could) be punished for offenses against our laws" (ibid.).
Finally, in Continental Ore, the defendants had conspired in the
United States to establish an exclusionary customer-allocation program
for sales of vanadium in Canada by utilizing the authority of a wholly
owned subsidiary of one of the defendants as the exclusive purchasing
agent for the Canadian government. In upholding the claim, this Court
analogized the case to Sisal, again distinguishing American Banana
(370 U.S. at 705 & n.13), and continued (id. at 706):
In the present case (plaintiffs) do not question the validity
of any action taken by the Canadian Government or by its Metals
Controller. * * * As in Sisal, the conspiracy was laid in the
United States, was effectuated both here and abroad, and
respondents are not insulated by the fact that their conspiracy
involved some acts by the agent of a foreign government.
This Court has never clarified the extent to which the holding of
American Banana survives Sisal Sales and Continental Ore, although in
Sabbatino the Court referred to American Banana as one of several
decisions "directly or peripherally" involving the act of state
doctrine that did not "manifest any retreat from Underhill" (376 U.S.
at 416). /12/ It is unclear, for example, to what extent American
Banana should now be viewed as turning primarily on the supposed
inapplicability of the antitrust laws to actions occurring outside the
United States, the apparent absence of unlawful conduct within the
jurisdiction of the United States, and the fact that the expropriation
was the immediate cause of the injury to the plaintiff. The mix of
these factors was obviously different from those in Sisal Sales and
Continental Ore, where an act of a foreign government was not so
central to the unlawful scheme and was not so directly the cause of
the injury to the plaintiff, and where there was less reason to
suppose that the foreign government had effectively ratified the
defendants' conduct.
3. In response to the Court's invitation in the Hunt and Mitsui
cases, the United States expressed the view -- which is quoted at
pages 3-4, supra, and in the Legal Adviser's letter to the district
court (Pet. App. A34-A35) -- that the act of state doctrine does not
ordinarily bar inquiry into the reasons why a foreign government took
the action in question. Although we have not reached a concluded view
on the point in the circumstances of this case, that continues to be
our view as a general matter at this time, at least where the
Executive Branch believes that the adjudication would be consistent
with the foreign relations interests of the United States. See First
National City Bank, 406 U.S. at 768 (opinion of Rehnquist, J.). It is
useful to bear in mind, however, the somewhat different factual and
legal contexts in which the issue may arise.
Cases in which the motives of a foreign government or its agents
are implicated have involved the revocation of a license under local
law (Mitsui and Mannington Mills); military contract procurement
decisions (Northrop Corp. and Williams); the expropriation of
property or seizure of territory (Hunt and Buttes Gas & Oil); and the
institution of judicial proceedings (Timberlane Lumber). Further, the
relationship of the question of "motivation" to the issues presented
has varied considerably, depending upon the nature of the claims and
defenses, the source and content of the applicable law, and the
underlying facts. Such a wide array of factual and legal contexts may
counsel against a single, inflexible rule as to when (if ever) inquiry
into the cause of a foreign government's acts should be barred by the
act of state doctrine.
For example, it seems clear that in Mitsui, the act of state
doctrine properly did not bar adjudication of the plaintiff's claim
that private defendants conspired to monopolize the lumber export
industry in Indonesia by causing plaintiff's joint venture to fail
under local law, which resulted in the automatic revocation of a
previously issued license under that same law, neutrally applied. To
resolve the liability issues, the court was not required to inquire
into the validity of the foreign sovereign's act, or even to resolve
any questions concerning the motivation of the officials who revoked
the license (see 594 F.2d at 53-55), and there was no reason why an
official act of a foreign government should have insulated the
defendants from liability that was the immediate and foreseeable
consequence of their unlawful conduct. As in Continental Ore, the
involvement by agents of the foreign government was little more than
the context in which the unlawful conduct occurred. By contrast, in
Hunt, the legality of the challenged expropriation as a matter of
international law would have turned in part on whether it was an act
of political retaliation and economic coercion. A judicial inquiry
into the purposes of the expropriation therefore would necessarily
have implicated its validity as a matter of international law. See
550 F.2d at 77.
4. For the foregoing reasons, the application of the act of state
doctrine presents difficult questions when the conduct of the foreign
state or its agents combines with the conduct of private parties to
injure the plaintiff. In that context, the act of state doctrine, as
a narrow exception to a court's general "duty to adjudicate" (Sharon
v. Time, 599 F. Supp. at 553), must be applied with circumspection, so
as not lightly to deprive individual litigants of their "day in
court."
In the present case, the court of appeals rejected what it regarded
as the "expansive interpretation" of the act of state doctrine in
Clayco, which held that judicial inquiry into whether a foreign
sovereign act resulted from a bribe was barred because it would
"'impugn or question the nobility of a foreign nation's motivation'"
(Pet. App. A15; see 712 F.2d at 407). The court below then
concluded, with little supporting analysis, that the act of state
doctrine should not bar further proceedings in this case because
"adjudicating (respondent's) claims before the court would have
required at most an inquiry only into the motivations behind, rather
than the legality of, the foreign government's acts." Pet. App. A21.
/13/ However, even if the court below properly concluded that a
judicial reluctance to impugn the integrity of a foreign government's
decision-making does not alone trigger the act of state doctrine, it
would not necessarily follow that the doctrine is altogether
inapplicable in the circumstances of this case. The court below was
of course correct that a decision in favor of respondent would not
require the district court formally to declare the Nigerian contract
invalid as a matter of Nigerian law. But as the district court
pointed out (Pet. App. A55-A56), a necessary element of respondent's
case is proof that the payment or promise of a bribe was the "but for"
cause of the contract award, /14/ and such proof may in turn have some
bearing on the validity of the contract.
As the parties and the courts below noted, Nigeria, like most
nations, makes bribery of a public official in return for performance
of an official act illegal. See Decree No. 38, Sections 1-3 (Nov. 22,
1975) reprinted in 62 Federal Republic of Nigeria Official Gazette,
No. 59 (Dec. 2, 1975). /15/ See also H.H. Marshall, The Laws of
Northern Nigeria, cap. 89, ch. X, Sections 115-122 (1965); D.
Kingdon, The Laws of the Federation of Nigeria and Lagos, Criminal
Code, cap. 42, ch. XII, Sections 98-104 (1958); cf. 18 U.S.C. 201
(1982 & Supp. V 1987). Under accepted common law principles in this
country, an agreement (such as that between Carpenter and Akindele) to
use improper influence to procure a government benefit is illegal as
contrary to public policy. /16/ Furthermore, applying similar common
law principles, the courts have held that the violation by a public
official of a criminal statute making it illegal for him to have an
interest in a government contract renders that contract void, or at
least voidable at the instance of the government. /17/ Nigerian law
may also declare that a government contract obtained by bribery is
invalid, at least at the option of the government. /18/
Thus, an adjudication by a United States court that a contract was
awarded by a foreign government because of the payment or award of a
bribe -- i.e., that the bribe was the "motivation" for the award --
may often establish facts necessary to render the award illegal under
the law of the foreign state and to render the contract itself
voidable or void as a result. /19/ However, it does not necessarily
follow that this consequence would trigger application of the act of
state doctrine or, if it did, that an exception or modification of
that doctrine would be inappropriate. It may be argued, for example,
that the fact that bribery is illegal under the law of Nigeria
distinguishes this case from American Banana, where the efforts to
obtain passage of the expropriation legislation were presumed to be
lawful under the law of Costa Rica. See 213 U.S. at 357-358; see
also Sisal Sales, 274 U.S. at 276, quoting American Banana, 213 U.S.
at 359 (emphasis added) ("'A conspiracy in this country to do acts in
another jurisdiction does not draw to itself those acts and make them
unlawful, if they are permitted by the local law.'"). Because the
general laws of the United States and Nigeria are in agreement
regarding the illegality of bribes made to public officials (cf.
Sabbatino, 376 U.S. at 428), it could be argued that proof of such a
bribe as an element of a cause of action arising under the laws of the
United States would not necessarily demonstrate the sort of disrespect
for another sovereign that has concerned the courts in other settings.
/20/
The Court might also take into account the fact that because both
Nigerian citizens and United States citizens were parties to the
allegedly unlawful transaction in this case, any interests of the
Nigerian Government that may be safeguarded by the act of state
doctrine by virtue of the performance by its officials of public acts
must be weighed against the interests of the United States in
regulating the conduct of its citizens who engage in the foreign
commerce of the United States. A relevant consideration in this
regard is that Congress, in the FCPA, has made it a criminal offense
for a United States national to offer a bribe to a foreign official in
order to obtain a contract and has authorized the Attorney General and
Securities Exchange Commission to seek injunctive relief or civil
penalties (15 U.S.C. 78dd-1 and 78dd-2, as amended by the Foreign
Corrupt Practices Act Amendments of 1988, Pub. L. No. 100-418, Tit. V,
Subtit. A, Pt. I, 102 Stat. 1415) -- thereby contemplating that such
conduct may properly be the subject of inquiry by United States courts
in some circumstances. /21/ On the other hand, the judicial
proceedings expressly authorized by the FCPA remain under the control
of the United States Government, which preserves an opportunity for
the Executive Branch to prevent any undue embarrassment to foreign
relations. In the absence of additional procedures, the Executive
Branch does not have the same opportunity where, as here, the
litigation is instituted by private parties. See Clayco, 712 F.2d at
409.
5. We do not propose a definitive resolution of the foregoing
issues and possible analytical approaches at this time. We merely
identify them now, in anticipation of the occasion for a comprehensive
consideration of the underpinnings and proper focus of the act of
state doctrine in this setting if the Court grants review.
CONCLUSION
The petition for a writ of certiorari should be granted, limited to
Question 1. With respect to Question 2, the petition should be held
and disposed of as appropriate in light of the Court's decision in
H.J. Inc. v. Northwestern Bell Telephone Co., No. 87-1252 (argued Nov.
8, 1988).
Respectfully submitted.
KENNETH W. STARR
Solicitor General
STUART E. SCHIFFER
Acting Assistant Attorney General
THOMAS W. MERRILL
Deputy Solicitor General
EDWIN S. KNEEDLER
Assistant to the Solicitor General
MICHAEL JAY SINGER
JOHN P. SCHNITKER
Attorneys
JUNE 1989
/1/ The statement of facts in the text is taken from the opinions
below, which are based on the allegations in the complaint. See Pet.
App. A4 n.1.
/2/ As alleged in respondent's amended complaint, the 20%
commission was to be distributed as follows: 2 1/2% to Akindele, 5%
for the Nigerian Air Force, 2 1/2% for the medical group, 5% for a
political party, 2 1/2% for the relevant cabinet minister, and 2 1/2%
for other key defense personnel. Pet. App. A5 n.3.
/3/ At Kirkpatrick's sentencing, the Assistant United States
Attorney informed the court that the State Department was concerned
about the possible impact on the Nigerian Government if the grand jury
disclosed information about who might have received the payments,
since some officials named were prominent military figures who were
still in power (Pet. App. A43-A44).
/4/ Counsel for respondent communicated with the Nigerian Embassy
in Washington, requesting a declaration "that the prosecution of this
civil action in the American Federal Courts will not have any impact
whatsoever on the relations between the Republic of Nigeria and the
United States of America" (Pet. App. A45). The Nigerian Government
did not respond to that letter; nor, apparently, has it repudiated
the contract or taken any other action in response to the allegations
(id. at A45, A62 n.14).
/5/ See Bernstein v. N.V. Nederlandsche-Amerikaansche, 210 F.2d 375
(2d Cir. 1954). In First National City Bank v. Banco Nacional de
Cuba, 406 U.S. 759 (1972), three Justices took the position that
"where the Executive Branch, charged as it is with primary
responsibility for the conduct of foreign affairs, expressly
represents to the Court that application of the act of state doctrine
would not advance the interests of American foreign policy, that
doctrine should not be applied by the courts" (id. at 768) (opinion of
Rehnquist, J.)). Justice Powell, in his concurring opinion (id. at
773), and Justice Brennan, in his dissenting opinion for four Justices
(id. at 776-777, 782-793), rejected the recognition of a "Bernstein
exception." See also id. at 773 (Douglas, J., concurring).
/6/ The court read the Legal Adviser's suggestion that the district
court exercise "caution and due regard for foreign sensibilities" as a
"reminder" that "(f)oreign governments have often expressed their
dissatisfaction with the wide discovery authorized under the Federal
Rules" and that courts should "exercise appropriate supervision over
discovery and other trial preparation to limit damage to foreign
sensibilities" (Pet. App. A19-A20 n.11).
/7/ We have furnished counsel for the parties with copies of our
brief in O.N.E. Shipping.
/8/ We take the position in H.J. Inc. that a "pattern of
racketeering activity" does not require multiple separate schemes, and
that a pattern is present if the defendant's acts are not isolated or
sporadic. We have furnished the parties in this case with a copy of
our brief in H.J. Inc.
/9/ Petitioners do not challenge the court of appeals' holding
(Pet. App. A29-A30) that respondent has stated an actionable violation
of Section 2(c) of the Robinson-Patman Act. See also Grace v. E.J.
Kozin Co., 538 F.2d 170, 173 (7th Cir. 1976); Rangen v. Sterling
Nelson & Sons, Inc., 351 F.2d 851 (9th Cir. 1965), cert. denied, 383
U.S. 936 (1966) (cited in California Motor Transport Co. v. Trucking
Unlimited, 404 U.S. 508, 513 (1972)).
/10/ For example, in Sabbatino itself, the act of state doctrine
did not require dismissal of the suit, but only that the expropriation
of property in that case be given effect as the rule of decision. See
376 U.S. at 428-437.
/11/ See, e.g., Leigh & Sandler, Dunhill: Toward a Reconsideration
of Sabbatino, 16 Va. J. Int'l L. 685, 709-718 (1976).
/12/ The lower courts have generally concluded that the holding of
American Banana has survived Sisal and Continental Ore, although they
have sometimes distinguished American Banana and found the act of
state doctrine inapplicable in the particular case. Compare Mitsui,
594 F.2d at 52-54 (doctrine inapplicable), with Hunt, 550 F.2d at
73-75 (doctrine applicable), and Occidental Petroleum Corp. v. Buttes
Gas & Oil Co., 331 F. Supp. at 109-110 (same).
/13/ In the circumstances of this case, there is considerable force
to the conclusion by both courts below that the decision to award a
military procurement contract -- a decision that is often "influenced
by national security considerations" -- is a sufficiently "official"
expression of a state's "public" interests to warrant application of
the act of state doctrine. Pet. App. A12-A13, A57. See Williams v.
Curtiss-Wright, 694 F.2d at 302; Northrop Corp. v. McDonnell Douglas
Corp., 705 F.2d at 1048. Compare Remington Rand Corp.-Delaware v.
Business Systems, Inc., 830 F.2d 1260, 1265 (3d Cir. 1987) (act of
foreign bankruptcy trustee not act of state); Mannington Mills, Inc.
v. Congoleum Corp., 595 F.2d 1287, 1294 (3d Cir. 1979) (issuance of
foreign patent not act of state).
/14/ See 18 U.S.C. 1964(c), 1962(b), (c), 1961(1)(A) (1982 & Supp.
V 1987); cf. Radiant Burners, Inc. v. Peoples Gas Light & Coke Co.,
364 U.S. 656, 659-660 (1960); see also Pet. App. A56.
/15/ The Decree provides that "any gratification" received by a
government employee from "a person or agent of a person who has or
seeks to have any dealing with the Government" is presumed "to have
been paid or given and received corruptly as an inducement or reward *
* * unless the contrary is proved" (id. at Section 4).
/16/ Crocker v. United States, 240 U.S. 74 (1916); Hazelton v.
Sheckells, 202 U.S. 71 (1906); Oscanyan v. Arms Co., 103 U.S. 261
(1880); Meguire v. Corwine, 101 U.S. 108 (1879); Trist v. Child, 88
U.S. (21 Wall.) 441 (1874); Tool Co. v. Norris, 69 U.S. (2 Wall.) 45
(1864). See also Montefiore v. Menday Motor Components Co., 87
L.J.K.B. 907, 909 (1918); Waldo v. Martin, 107 Eng. Rep. 1078, 1080
(1825); Morris v. MacCullock, 28 Eng. Rep. 870, 871 (1763).
/17/ United States v. Mississippi Valley Generating Co., 364 U.S.
520, 563-566 (1961); Pan American Petroleum & Transport Co. v. United
States, 273 U.S. 456, 500 (1927); Crocker v. United States, 240 U.S.
at 81; Burck v. Taylor, 152 U.S. 634 (1894); Miller v. Ammon, 145
U.S. 421 (1892); Bank of the United States v. Owens, 27 U.S. (2 Pet.)
527 (1829). See also City of London Electric Lighting Co. v. Mayor of
London, (1903) App. Cas. 434 (H.L.(E)), aff'g (1901) 1 Ch. 602, 613
(Rigby, L.J.); Meliss v. Shirley & Freemantle Local Board of Health,
16 Q.B.D. 446, 451-452 (1885).
/18/ Nigeria is a former British colony, and its law is broadly
based upon English common law principles. See T. Elias, The Nigerian
Legal System 12, 17-21, 214 (1963) ("principles governing * * *
(Nigerian) cases on contract * * * are * * * broadly the same as those
of English law"); see also Sodipo v. Lemninkainen Oy, (1986) 1
N.W.L.R. 220, 232 (Nigeria Sup. Ct.). Relying on English precedents,
Nigerian courts have held that a contract to use improper influence to
procure a government benefit (such as a government contract) is
illegal as contrary to public policy. Koko v. Page Communications
Engineers Inc., (1975) N.C.L.R. 149, 156-157 (Lagos High Ct.). See
also O. Achike, Nigerian Law of Contract 179 (1972). Similarly,
Nigerian courts have held that illegality renders a contract invalid.
Sodipo v. Lemninkainen Oy, (1986) 1 N.W.L.R. at 229, 232-236. See
also George v. Dominion Flour Mills Ltd., (1963) 1 All N.L.R. 71,
73-74 (Fed. Sup. Ct.).
/19/ A United States court might even distinguish between a void
contract and a voidable contract for these purposes. It could
conclude, for example, that unless the foreign government formally
repudiates the contract, it should be regarded as valid,
notwithstanding an adjudication by a United States court that an
officer of the foreign government awarded the contract only because he
received a bribe.
/20/ In Sabbatino, the Court held that the Cuban expropriation
decree could not be challenged on the ground that it was not issued in
conformity with Cuban law. The Court concluded that the act of state
doctrine bars a United States court from inquiring into the validity
of an act of an official of a foreign state under the law of that
state, because such an inquiry "would not only be exceedingly
difficult but, if wrongly made, would be likely to be highly offensive
to the state in question" (376 U.S. at 415 n.17). In this case, by
contrast, respondent does not ask the courts below to find either the
alleged payment of bribes to Nigerian officials or the award of the
contract to Kirkpatrick rather than respondent unlawful as a matter of
Nigerian law. Respondent contends, rather, that it was injured as a
result of petitioners' violation of United States law. We suggest in
the text only that a court might be permitted to adjudicate the
alleged violation of United States law because the type of conduct on
which the violation is premised -- the bribery of public officials --
is also a violation of Nigerian law.
/21/ Sage Int'l v. Cadillac Gage Co., 534 F. Supp. 896, 905 (E.D.
Mich. 1981); Dominicus Americana Bohio v. Gulf & Western Indus., 473
F. Supp. 680, 690 (S.D.N.Y. 1979); contra Clayco, 712 F.2d at 409.
See also Note, Act of State Doctrine: An Emerging Corruption
Exception in Antitrust Cases, 59 Notre Dame L. Rev. 455 (1984); Note,
Clayco Petroleum Corp. v. Occidental Petroleum Corp.: Should There Be
a Bribery Exception to the Act of State Doctrine?, 17 Cornell Int'l
L.J. 407 (1984).